Q: You continually refer to people getting full benefits at age 66. But you should know that for lots of readers of your column, our full retirement age is greater than age 66. For example, I will have to be 66 and 6 months to get my full benefits. Can you please keep this in mind as you write future columns?
A: I have been dreading getting an email like this for years now. Well, maybe “dreading” is too strong a word. But I sure haven’t been looking forward to this. Explaining complex Social Security rules can be enough of a challenge. Throwing in this little monkey wrench of an issue — the increasing retirement age — is just going to make my life a little more difficult.
“Back in the day,” as they say, back when I was just a young pup in the early years of my Social Security career, life was pretty simple. The retirement age was the same for everyone — 65. You could take benefits as early as age 62, or anywhere in between. But still, there was only one “full retirement age.”
That all changed in the early 1980s. Adopting recommendations that grew out of the National Commission on Social Security Reform, Congress raised the retirement age to 67. But to ease the transition to the new law, they did it in gradual steps. The first people impacted by the law were those born in 1938. They had to be 65 and 2 months to get full benefits. People born in 1939 had to be 65 and 4 months. Full retirement age kept going up in 2-month increments until we reached folks born in 1943. Their full retirement age was set at 66. And full retirement age leveled off at that age for the next 12 years. In other words, anyone born from 1943 through 1954 must be 66 to get full benefits.
So for this past decade or so, at least with respect to this issue for most of my readers, my life has been relatively easy. I’ve been able to refer simply to age 66, rather than the more awkward term, “full retirement age,” or the unfamiliar acronym “FRA,” when discussing the topic.
But for people born in 1955 and later, the retirement age starts to climb again. People born in 1955 must be 66 and two months to claim full benefits. Those born in 1956 must be 66 and 4 months. And once again, it keeps going up in 2-month increments until we reach folks born in 1960 and later. They must be 67 before they reach FRA.
Congress did not change the early retirement age. It is still 62, no matter what age you must be to get full benefits. Those folks born in 1955 will be turning 62 in just a couple years and they are starting to get really interested in Social Security and they are starting to pay particular attention to this column.
So pretty soon, I’m going to have to stop simply referring to age 66 and I’m going to have to use “full retirement age” when discussing the issue of claiming full Social Security benefits. I’m not looking forward to that, partly because it makes for more stilted language, and partly because, frankly, lots of folks don’t know their full retirement age. I envision lots of scenarios where I will write, for example, “When you reach full retirement age, you can do xyz...” And people will come back to me and say, “What’s full retirement age?”
Finally, there is a different set of retirement age rules for survivor benefits — in other words, for widows and widowers. But that will have to be the topic for another column.
Q: I was born in 1961. My full retirement age is set to be 67. That is still quite a ways off. Should I even bother making plans to retire because Congress will increase the retirement age again?
A: I think you can bet the farm that when Congress finally does get around to enacting Social Security reforms, one of the changes will be an increase in the retirement age.
But I think you can also rest assured those changes won’t impact you. Just as the last time Congress tackled this issue, back in the 1980s, they implemented the changes over a very long period of time. It won’t be until 2027 that people (like you) will have to be 67 to collect full Social Security benefits. That’s almost a half-century since the changes were first implemented.
My hunch is they will start bumping up the retirement age again for people born maybe around 1970 and later. And once again, it will go up in gradual steps. In other words, your kids and your grandkids, not you, might have to wait beyond age 67 to collect full Social Security benefits.
Q: I don’t like the fact that if I want to take benefits before age 66, I am penalized (by withholding some of my Social Security benefits) if I earn over a certain arbitrary limit set by Congress. Do you think that will ever change?
A: I really wish Congress would eliminate the Social Security earnings penalty. Most beneficiaries have a hard time understanding the rules. (In a nutshell, you lose one dollar in benefits for each two dollars you earn over $15,720. But it gets way more complicated than that.)
It’s also a mess for the Social Security agency to administer. People are constantly being overpaid or underpaid because of these archaic rules. They are a holdover from the earliest days of the program when it was felt you had to retire to get “retirement” benefits. But a long time ago, they eliminated the penalty once you reached full retirement age. So why not eliminate the penalty altogether?
Actually, I can answer my own question. Costs. The Social Security system would pay out billions more dollars in benefits each year if the earnings penalty were eliminated. For a system already strapped for long-range cash due to the ticking time bomb of retiring baby boomers, Congress isn’t exactly looking for ways to increase Social Security expenditures.
